Game theory mixed with cat and mouse
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Game theory mixed with cat and mouse

Foundry Networks makes the gigabyte ethernet switches that help internet companies to avoid bottle-necks on their systems. Last year it decided to go public. Its bankers, Deutsche Banc Alex Brown, worked out a pricing range of $14 to $18, eventually priced above the range at $25, and by the end of the Wrst day you could get hold of them for $156.25 apiece - a 525% Wrst-day pop (these numbers are before a two-for-one stock split).


Huge first-day pops have often heralded poor longer-term performance. But not this time. Not that the bankers were happy with the first-day gain. "We'd rather not have seen such a huge increase," says Tony Meneghetti, managing director in Deutsche Banc Alex Brown's technology group. "But we were less concerned than we might have been - we knew they had the right infrastructure."


Alex Brown bankers don't like huge Wrst-day gains. They run the risk of those you hope are going to be your core long-term investors selling out immediately. And cashing in a 525% gain must be pretty damn tempting. But this time they seem to have got away with it.


How? First, the management is well known, not least Bill Johnson.




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